CBN introduces N250 billion stimulus package for gas investment to ease pain of fuel price increase
The CBN has introduced a stimulus package to help stimulate investment in gas as an alternative to fuel.
As part of the palliative following the sharp increase in the price in the pump price of petrol, the Central Bank of Nigeria (CBN) has introduced a N250 billion stimulus package under a National Gas Expansion Programme that it hopes will help stimulate investment in the gas value chain and spur its use in transportation as an alternative to fuel-powered cars.
Large scale projects under this intervention programme will be financed under the Power and Airlines Intervention Fund (PAIF), in line with existing guidelines regulating the PAIF, while small scale operators and retail distributors will be financed by the NIRSAL Microfinance Bank (NMFB) and/or any other Participating Financial Institution (PFI) under the Agribusiness/Small and Medium Enterprises Investment Scheme (AgSMEIS).
This initiative is to be implemented in collaboration with the Federal Ministry of Petroleum Resources.
The objectives of the facility include;
- Improved access to finance for private sector investments in the domestic gas value chain.
- Stimulate investments in the development of infrastructure to optimize the domestic gas resources for economic development.
- Fast track the adoption of Compressed Natural Gas (CNG) as the fuel of choice for transportation and power generation, as well as Liquefied Petroleum Gas (LPG) as the fuel of choice for domestic cooking, transportation, and captive power.
- Fast track the development of gas-based industries particularly petrochemical (fertilizer, methanol, etc) to support large industries such as agriculture, textile, and related industries.
- Provide leverage for additional private sector investments in the domestic gas market.
- Boost employment across the country.
The activities that are eligible under the intervention shall include;
- Establishment of gas processing plants and small scale petrochemical plants.
- Establishment of gas cylinder manufacturing plants.
- Establishment of L-CNG regasification modular systems
- Establishment of autogas conversion kits or components manufacturing plants.
- Establishment of CNG primary and secondary compression stations.
- Establishment and manufacturing of LPG retail skid tanks and refilling equipment.
- Development/enhancement of autogas transportation systems, conversion, and distribution infrastructure.
- Enhancement of domestic cylinder production and distribution by cylinder manufacturing plants and LPG wholesale outlets.
- Establishment/expansion of micro-distribution outlets and service centres for LPG sales, domestic cylinder injection, and exchange and
- Any other mid to downstream gas value chain related activity recommended by the Ministry of Petroleum Resources.
The aggregators, manufacturers, processors, wholesale distributors, and related activities shall be funded under the Power and Airline Intervention Fund (PAIF), while the Small and Medium-scale Enterprises (SMEs) and retail distributors shall be funded by NIRSAL Microfinance Bank under AgSMEIS.
For the manufacturers, processors, wholesale distributors, etc, the term loan shall be determined based on the activity and shall not exceed N10 billion per obligor. The working capital shall be a maximum of N500 million per obligor.
While for the small and medium enterprises, the term loan shall be based on the activity and shall not exceed N50 million per obligor. The working capital shall be a maximum of N5 million per obligor.
The interest rate under the intervention shall be at not more than 5% per annum (all-inclusive) up to February 28, 2021, thereafter, interest on the facility shall revert to 9% per annum (all-inclusive) with effect from March 1, 2021.
Loan Tenor and Moratorium
The manufacturers, processors, wholesale distributors, will have term loans which shall have a maximum tenor of 10 years (not exceeding December 31, 2030) with a maximum of a 2-year moratorium on principal repayment only. The working capital facility of 1 year with a maximum rollover of not more than twice, subject to prior approval.
The small and medium enterprises (SMEs) and retail distributors will have term loans that shall have a maximum tenor of 5 years (not exceeding December 31, 2030) with a maximum of 2 years on principal repayment only. The working capital facility of 1 year with a maximum rollover of not more than twice and subject to prior approval.
This new initiative involves getting many vehicles to run on gas by collaborating with investors to build the required infrastructure such as pipelines and petrol stations. It is also expected to help accelerate the use of natural gas and end gas flaring.
Shell unveils new business line in Nigeria
Global energy giant, Shell, has announced the expansion to a new business line in Nigeria with the expansion of natural gas sales and distribution to meet the growing energy needs of wholesale consumers and provide more and cleaner energy across the country.
The new business line, which is Shell Energy Nigeria will seek to deliver gas-based energy solutions to businesses across the country to help drive economic development while also delivering greater value from the country’s natural resources.
According to a statement signed by the Media Relations Manager of Shell, Bamidele Odugbesan, the new business is expected to draw on the capabilities and experience of Shell Energy, a leading global provider of reliable, integrated and innovative energy solutions from a portfolio of natural gas, power and environmental products.
What the General Manager of Shell Energy Nigeria is saying
The General Manager, Shell Energy Nigeria, Markus Hector, said, “In line with the Federal Government’s ‘decade of gas’ initiative, Shell Energy Nigeria will strive to deliver gas-based energy solutions to a broad range of businesses across the country to help drive economic development and deliver greater value from the country’s natural resources.’’
Shell Energy Nigeria’s gas solutions are designed to partner with other sources of energy – including renewables – to provide competitively priced and flexible energy, while helping the country to transition to a lower carbon energy system.
What the Country Chair of Shell Companies in Nigeria is saying
The Country Chair of Shell companies in Nigeria, Osagie Okunbor, said, “Shell Energy Nigeria demonstrates our ongoing commitment to powering progress by providing more and cleaner energy solutions in the country. It brings to Nigeria Shell’s decades of marketing and trading experience, a wealth of market knowledge and its ability to integrate energy solutions to support economic development in Nigeria.”
The new business offers a comprehensive selection of energy solutions available from a single supplier and made possible by one of the industry’s largest trading operations.
Building on the success of Shell Nigeria Gas, Shell Energy Nigeria, aims to deliver competitive and reliable energy for power generation and industrial users and to develop gas distribution to serve people in new regions.
What you should know
This appears to be a new business focus and strategy for Shell in its operations in Nigeria.
Recall that recently, Shell had intensified its move to drive down carbon emissions as well as deliver value to their shareholders, customers and the general public.
Meanwhile, Royal Dutch Shell had in July 2021, launched a major divestment of its Nigerian assets as they had engaged Standard Chartered to sell its Shell Petroleum Development Company of Nigeria Limited (SPDC) subsidiary.
The sources had said that Shell is selling its Nigerian business because it no longer views its activities in the Niger Delta as core to its ongoing strategy, which is driven by the Environmental, Social and Governance (ESG) pressure from its investors.
Shell Nigeria Gas (SNG) will continue its current operations as part of Shell Energy Nigeria.
SNG was incorporated in 1998 SNG is a fully owned Shell company for the downstream distribution of gas to over 120 industries and manufacturing plants in Nigeria. The company’s 150-kilometre gas transmission and distribution network serves several distribution systems, including Agbara-Ota industrial cluster in Ogun State, the Aba Cluster in Abia State, and the Port Harcourt Cluster in Rivers State
FG commences construction work on 50MW gas plant in Maiduguri
The Federal Government through the Nigerian National Petroleum Corporation (NNPC) on Thursday commenced the construction of a 50 megawatts gas power plant for the supply of electricity to Maiduguri and environs.
The construction of the plant which is an emergency power project was approved by President Muhammadu Buhari.
According to NAN, this followed the sustained attack on power supply lines (330 KVA and 132 KVA lines) from the National grid to Maiduguri by suspected terrorists which have put the city and environs in total blackout for the past 9 months.
While performing the groundbreaking ceremony in Maiduguri, the Governor of Borno State, Babagana Zulum, said the project would be executed by the NNPC in collaboration with Chinese and American firms.
Zulum said that the project would bring significant relief to the people of Borno state and expressed gratitude to the Federal Government under the leadership of President Buhari for approving the construction of 50 megawatts power plant which is the first of its kind in the history of the country.
He said the plant would impact positively on socio-economic activities of the state which has been crippled by the destruction of electricity towers by the insurgents.
He assured residents of the commitment of his administration to work with all stakeholders to ensure the successful completion of the project in the stipulated 6 months time frame.
He expressed the appreciation of the government and people of Borno to Buhari and NNPC for the sustained concern and support to the people of Borno.
Speaking at the occasion, the Group Managing Director of NNPC, Mr Mele Kyari, gave the assurance that the project would be delivered in good time and has already awarded the contract to General Electric Global for the supply of gas turbine.
Kyari said orders have already been placed for turbine and other facilities for the project.
Power: Nigeria committed to electrifying 5 million households – Buhari
President Muhammadu Buhari said the Nigerian Government is committed to electrifying 5 million households in Nigeria under the Energy Transition Plan.
President Buhari disclosed this at the 76th United Nations General Assembly in New York, highlighting Nigeria’s role as a Global Theme Champion for the Energy Transition.
“Nigeria’s commitment to a just transition is reflected in our ambitious Energy Compact, which includes the Government’s flagship project to electrify five million households and twenty million people using decentralized solar energy solutions,” Buhari told the UN General Assembly.
He added that it is a major first step towards closing Nigeria’s energy access deficit by 2030 and called for support from developed countries to unlock the finance needed to accelerate a just energy transition for all.
“Nigeria’s commitment is also reflected in the development of our Energy Transition Plan, which was developed with support of the UK COP26 Energy Transition Council.
“The focus of our discussions on transition must now involve how we help countries develop detailed energy transition plans and commitments to mobilize enough financing to empower countries to implement those plans,” President Buhari said.
He added that Nigeria’s electricity generation plan needs major financing that amounts to over US$ 400 billion over the next 30 years.
“This breaks down to US$ 155 billion net spend on generation capacity, US$ 135 billion on transmission and distribution infrastructure, US$ 75 billion on buildings, US$ 21 billion on industry and US$ 12 billion on transport.”
He highlighted the importance of Natural gas towards Nigeria’s electricity needs stating that it is “imperative that I flag a major risk to development that stems from the current narrative around the energy transition, particularly on the role of gas and the lack of financing.
“Nigeria’s Energy Transition Plan has laid out our roadmap to reach net-zero and highlights the scale of the effort required, which includes the development and integration of renewables into current grid infrastructure at tremendous scale and electrification of all sectors.
“This is challenging for any country, especially a developing country. On our development objectives, gas will have a key role to play here for some years before being phased out,” he said.
What you should know
Recall It was reported recently that the Nigerian electricity sector, classified with gas, steam and air conditioning supply recorded a 78.16% year-on-year real GDP growth in the second quarter of 2021, by far the highest growth rate record by any sector in the review period.